I'm not one of the 1% that has been maligned by the left. I do pay taxes so I guess I'm not in the bottom 47% either. I'm what you would call “middle class” in every sense of the word. Why then are my taxes going up? I'll tell you why – It's the Affordable Care Act AKA Obamacare. Just recently, my employer published a little pamphlet that detailed how the new healthcare laws would effect our coverage at work. I don't like the changes. Here are a few of the changes that effect me the most.
First, Health Savings Accounts (HSA) can no longer be used to buy over the counter drugs. It used to be that I could use my HSA to buy allergy pills for my son or naproxen for my wife's arthritis. By using my HSA, it meant that I was spending “before tax” dollars to pay for these over the counter drugs so if I spent $20 per month on these pills, I essentially took $240 off my taxable income each year. I still have to buy these pills, but thanks to Obamacare, I now use “after tax” dollars which means I'm now taxed on that $240. In a 20% tax bracket, that's $48 more in taxes just on my over the counter drug costs!
Another big change is in the tax deductible portion of medical costs. Currently, a person or family can deduct the actual cost of their medical expenses that exceed 7.5% of his/their income. Under Obamacare, that is increasing to 10%. Here's an example of how that costs more money: Suppose a struggling family makes $50,000 per year and has $5,000 in out of pocket medical costs. 7.5% of $50K is $3,750 so under the currently plan, they could deduct $1,250 from their taxable income ($5,000 in expenses minus the $3,750 threshold). Again assuming a 20% tax bracket, that would reduce this family's taxes by $250. Under the new plan, the new threshold is 10%. 10% of $50K is $5,000 so this same family under the same circumstances cannot deduct anything!
Still another change impacts those people (like me) who have high deductible insurance plans. Under my current insurance plan, I have a $3000/person or $6,000/family deductible per year. It sounds high but with my HSA, it's not bad. Under high deductible plans, the insurance companies are not paying for every little trip to the doctor (my HSA covers most of these) but I am insured against a catastrophic illness. I like this plan. It keeps my premiums low yet I still have peace of mind knowing that I'm covered if something terrible should happen. In the last 3 years with my employer, I haven't once reached the $3000 individual deductible.
Under the new plan, the maximum allowable deductible is only $2,000/person. Even though I've never actually had to pay $3,000 out of my pocket, I'm going to start having higher costs in the form of higher premiums. I haven't yet gotten the new rates but, on a family plan, I am certain my premiums will increase at least $100 per month. That may not be a new tax, but it's still more money out of my pocket each month because of Obamacare.
Yet the biggest tax increase will be in the employer paid portion of medical insurance. Under Obamacare, employers will start including the employer's cost for the employee's medical insurance on the employee's W2! So, if my employer is paying $400 per month for my insurance, I can expect to see a $4,800 item on my W2. Again, if we assume a 20% tax bracket, that's $960 more in taxes I'll have to pay. But mine is not even the worst. It's those employees who have the so-called “Cadillac” plans (like many union workers) who will get hurt the most by this. If a high paid, union worker has a real sweet, low deductible, family plan where his employer is paying $700, $800, or even more each month, that employee is going to face an increased tax burden of thousands of dollars! It's no wonder Obama has been writing waivers for many of his union buddies. I wonder how long that's going to last once this part of Obamacare takes effect?
Do you remember when Obama said if we liked our currently plans then we could keep them? That was a lie. Do you remember when Obama said that his new plan would lower healthcare costs? That was a lie. Do you remember when Obama said he wouldn't raise taxes on the middle class? That was a lie. Do you remember when Obama said he wouldn't support healthcare reform if it added one dime to the deficit? That was a lie too because the CBO says Obamacare will add $1.2 trillion to the deficit over the next ten years. Even the name, The Affordable Care Act, is a lie because I can't afford it and neither can the nation.
Obama was right about one thing; he had promised change. How sad it is that we just blew our chance to change it back.